Oil and gas firms not off the tax hook yet

North Sea oil and gas companies still risk a windfall tax on profits despite earning a reprieve in last week's Budget, the head of an influential committee of MPs has warned.

North Sea oil and gas companies still risk a windfall tax on profits despite earning a reprieve in last week's Budget, the head of an influential committee of MPs has warned.

Martin O'Neill, chairman of the Trade and Industry Select Committee, said that oil companies should not think they will be let off scot-free.

Calls for a windfall tax have been growing louder as the companies report record profits on the back of surging oil and gas prices. Last week, the Chancellor forwarded an estimated £1.1bn in future corporation taxes on oil companies to next year, but the industry escaped any windfall tax.

Mr O'Neill said that this did not mean there would be no levy after the general election, expected in May. He added that a levy could come at next year's Budget instead.

"The Government could not have introduced a windfall tax because it had indicated that there would be no change to the fiscal regime before the election.

"You have to have a government confident of being able to do it. The earliest [for a windfall tax] is at next year's Budget, providing profits stay high."

This week, Mr O'Neill's committee will publish its report on UK gas and electricity price increases. He outlined ways in which the oil industry might be able to avoid a future windfall tax. This could include companies helping to meet the cost of energy-saving initiatives. "A realistic approach would remove the need [for a windfall tax]," he said.

The UK Offshore Operators Association said that any other windfall tax, like the 10 per cent increase in corporation tax on oil companies in 2002, would further damage investment and job prospects for the industry.